Budget, staff projected to rise for internal audit departments

Half of companies are maintaining their internal audit budget, and
41% plan to increase their spending, according to
The
Pulse of the Profession, a twice-annual survey of North
American audit executives by The Institute of Internal Auditors (IIA).

That’s the highest percentage of projected increases since the
survey began in 2008. Also, the number of companies projected to
shrink the internal audit budget (9%) is at a low point, beating the
previous low of 14% from four years ago.

The numbers are in stark contrast to the resources devoted to
internal audit during the recent economic downturn. In 2009, 29% of
companies planned to decrease budgets, and 19% planned to decrease
internal audit staff, the report showed.

The survey shows that audit coverage in 2013 could continue to lag
in two main areas: risk management effectiveness and
strategic/business risks. Just 4% of the coming year’s audit coverage
will concentrate on strategic/business risks, the survey showed, and
5% would be devoted to assurance of risk management.

Richard Chambers, the IIA’s CEO, expects risk associated with
mobile technology to rise in importance. He also has simple advice for
chief audit executives (CAEs) in budgeting for future coverage: Follow
the risk.

“Certain areas of coverage will ebb and flow, depending on what
areas of risk are emerging,” Chambers said. “No matter how large your
department, no matter your constraints, follow the risk. [CAEs] should
devote resources to the most significant risks.”

Recruiting a different skill set

Audit executives in the survey plan to focus most predominantly on
two skills when seeking to add audit staff: analytical or critical
thinking and communication.

This reflects a continuing change in role for the internal auditor,
where the ability to clearly analyze and convey data is growing more
important, as are soft
skills. Seventy-seven percent of respondents said
analytical/critical thinking is a key skill they’ll seek in
recruitment, and 66% said that about communication skills. Data mining
and analytics was next at 47%. In the previous
survey, analytical/critical thinking was chosen as a key skill by
73% of respondents, and communication by 61%.

“It reflects the kind of skills that are needed to address those key
areas of risk,” Chambers said. “Accounting skills is seventh on the
list (29%); that’s not a primary area. During peak SOX coverage, it
would have been a much higher-rated skill. I would expect that those
would change and evolve as coverage does.”

Whistleblowers

The survey of 545 CAEs and internal audit directors in the United
States, Canada, and the Caribbean focused several questions on
companies’ hotline and whistleblowing processes since the SEC
announced the Dodd-Frank Act’s whistleblower program in August 2011.

Employee whistleblowing has remained essentially unchanged since the
program was enacted. Seventy-eight percent of respondents said they
had little to no concern over employees’ circumventing internal
whistleblowing processes; just 2% said they were highly concerned.
Additionally, 84% said hotline complaints or tips had remained stable
since August 2011.

The top type of complaint to hotlines related to personnel
management (38%). The total related to fraud and corruption, including
misuse of assets, was 20%.

The report offered three tasks for CAEs to address in the coming year:

Look carefully at planned audit coverage with particular attention
to aligning that coverage to the key risks of the organization
consistent with stakeholder expectations, especially as it relates
to the areas of strategic/business risks and risk management
effectiveness.

Continue to recruit skills that align with emerging audit coverage
and the talent needs of the present and future.

TAX NEWS

President Barack Obama signed legislation that retroactively extended more than 50 expired tax provisions for 2014, allowing taxpayers to take advantage of a host of tax incentives during this filing season.

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